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May 25, 2013

Investors Show Strong Commitment to Alternative Strategies

Preqin reports investors proactively source alternative asset classes

When it comes to diversifying their portfolios with alternative investments, investors remain proactive and their confidence remains robust, according to a report published last week by Preqin, the alternative assets data and intelligence provider.

Investors, particularly pension funds, have shown a strong tendency over the past decade to move away from traditional public equities and bonds into alternative strategies in order to create portfolios with better risk/return profiles. At least 80% of investors in private equity, hedge funds, real estate and infrastructure said in an April survey that they planned to maintain or increase their allocations throughout 2013.

Half of those surveyed had a proactive approach to sourcing alternative asset fund investments, and a further 31% had adopted a mixture of proactive and passive approaches.

Other key findings in the report:

* 64% of investors had an internal investment team that proactively sourced and examined alternative asset fund investments

* 67% had two or more investment-focused employees dedicated to alternative assets

* 59% of the institutional investors that invest in private equity said they would maintain their level of exposure throughout 2013, and 27% said they would increase their allocation

* 33% of hedge fund investors planned to increase their exposure to the asset class, while 20% planned to decrease their allocation throughout 2013

* 93% of real estate investors said they would either maintain or increase their exposure to the asset class over the course of 2013

* 58% of investors with a dedicated allocation to infrastructure were looking to increase their allocation over the same time period, while only 4% planned to reduce their exposure over the next 12 months

The report said all private equity strategies tracked by the PrEQIn Private Equity Quarterly Index, apart from venture capital, were outperforming the S&P 500 index as of Q3 2012 and had shown four successive quarterly increases since Q3 2011.

“Although the benefits of investing in each alternative asset class vary, it is clear that most investors want to keep a notable allocation to alternative assets going forward, with many looking to increase their exposure,” Stuart Taylor, Preqin’s head of investor products, said in a statement.

Many investors are becoming more sophisticated with how they access alternative assets, he said. “One of the main challenges that investors still face, however, is identifying the most appropriate funds that are in the market to make commitments to.”

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